Technical Bulletin: November 2017
1. Accounting
ACCOUNTING STANDARDS FOR PRIVATE ENTERPRISES (ASPE)
New developments
Accounting for Related Party Financial Instruments and Significant Risk Disclosures (Proposed amendments to Financial Instruments, Section 3856)
Exposure draft issued by the AcSB in October 2017 proposes to amend Section 3856 with respect to the accounting for financial instruments between related parties and significant risk disclosures. Initial measurement of related party financial instruments will be as follows:
- financial instruments measured at cost, unless the instrument is equity that is quoted in an active market or a derivative contract,
- financial instruments that are quoted in an active market and derivative contracts measured at fair value without any adjustment.
Subsequent measurement will be as follows:
- investments in equity instruments that are quoted in an active market and derivative contracts measured at fair value,
- all other instruments measured at cost, less any reduction for impairment.
An enterprise would be required to first assess for, and recognize in net income, any impairment of a related party financial asset before the forgiveness of the related party financial asset is recognized. There will be added guidance on how NFPOs initially measure related party financial instruments.
Requirements would be added to Section 3856 for an enterprise to disclose when it recognizes the forgiveness of a related party financial asset or extinguishment of a related party financial liability in net income because it was impracticable to determine whether the amount forgiven or extinguished originated in the normal course of operations. Disclosures about significant risks arising from derivatives would be permitted to be included with risks arising from other financial instruments, as opposed to requiring this disclosure to be illustrated separately.
Comment period ends on January 29, 2018.
Retractable or Mandatorily Redeemable Shares Issued in a Tax Planning Arrangement (Proposed amendments to Sections 1591, 3251 and 3856)
Exposure draft issued by the AcSB in September 2017 proposes to modify the accounting for retractable or mandatorily redeemable shares issued in a tax planning arrangement. The proposed amendments are as follows:
- The classification exception in Financial Instruments, paragraph 3856.23, would be amended to focus on whether control of the enterprise issuing the shares is retained.
- Guidance on assessing the effect of substantive rights in the control assessment would be added to Subsidiaries, Section 1591.
- The amendments would require a reassessment of the classification of the retractable or mandatorily redeemable shares issued in a tax planning arrangement classified as equity only when a subsequent event or transaction occurs that indicates one or more of the conditions for equity classification may no longer be met. Reclassification of retractable or mandatorily redeemable shares to financial liabilities would be required when the conditions for equity classification are no longer met at the reassessment date.
- Retractable or mandatorily redeemable shares issued in a tax planning arrangement initially classified as financial liabilities would be prohibited from being subsequently reclassified to equity even if conditions change.
- Retractable or mandatorily redeemable shares issued in a tax planning arrangement classified as financial liabilities would be measured at the redemption amount.
- Guidance would be added in Equity, Section 3251, to present as a separate component of equity the effect of classifying and measuring the retractable or mandatorily redeemable shares as financial liabilities and to disclose the nature of the separate component of equity.
The AcSB proposes the effective date of the amendments to be for fiscal years beginning on or after January 1, 2020. Comment period ends on January 15, 2018.
Active projects – watch for further activity on these matters
|
Proposed change |
Summary |
Status |
|---|---|---|
|
Agriculture |
As a result of a lack of specific authoritative guidance, there is diversity in accounting by private enterprises for biological assets and agricultural produce. Stakeholder input to this Discussion Paper will assist the AcSB in deciding whether to develop authoritative guidance, and if so, the issues to be addressed and how they could be addressed. |
This Discussion Paper was published by the AcSB in December 2015. Currently in deliberations. The AcSB plans to issue and exposure draft by 1st quarter of 2018. The AcSB Agriculture Advisory Group has been formed to assist the AcSB as it works to develop new accounting guidance on agriculture. |
Questions?
Here are some resources that will assist in the application of the standards.
CPA Canada Publications for ASPE
The following publication has recently been issued:
Financial Reporting Alert – Subsidiaries, Investments and Interests in Joint Arrangements (July 2017).
Private Enterprise Advisory Committee
This committee assists the AcSB in maintaining and improving accounting standards for private enterprises and advises on the need for non-authoritative guidance about the standards. At the request of the AcSB, the committee may also undertake research into the financial reporting needs of private enterprises.
Click here to access recent meeting notes.
Digest of issued standards and amendments
|
Standards affected |
Summary of changes |
Effective date |
|---|---|---|
|
Section 3056, Interests in Joint Arrangements |
Amendments clarify that the transitional provisions may not be applied when an enterprise changes its accounting policy choice to consolidate its subsidiaries at any time in the future and that this relief is only available when transitioning to this Section for the first time. FYI Article – Accounting For Investments: Are You Ready For the Changes? |
Annual financial statements relating to fiscal years beginning on or after January 1, 2017. |
|
Section 1591, Subsidiaries |
Amendments:
Amendment sets out the underlying principle that an interest in a subsidiary that is subsequently accounted for using the cost method is initially measured on a basis that is similar to other business combinations. FYI Article – Accounting For Investments: Are You Ready For the Changes? |
Annual financial statements relating to fiscal years beginning on or after January 1, 2017.
|
|
Section 3051, Investments |
Amendments add guidance on how to apply the cost method and add two indicators of impairment relating to the acquisition of an additional interest, sale of a portion of an interest or dilution of an investor's interest in an investee. FYI Article – Accounting For Investments: Are You Ready For the Changes? |
Annual financial statements relating to fiscal years beginning on or after January 1, 2018. |
|
2017 Annual Improvements |
Amendments to Sections 1505, 1506, 1521, 1651, 3031 and 3065. |
Annual financial statements for fiscal years beginning on or after January 1, 2018. |
ACCOUNTING STANDARDS FOR NOT-FOR-PROFIT ORGANIZATIONS (ASNPO)
Questions?
Here are some resources that will assist in the application of the standards.
Not-for-Profit Advisory Committee
This committee’s purpose is to advise the AcSB on maintaining and improving ASNPO and in identifying the need for non-authoritative guidance about the standards. The committee makes recommendations to the AcSB but is not authorized to interpret or provide authoritative guidance.
Click here to access recent meeting notes.
Active projects – watch for further activity on these matters
|
Proposed change |
Summary |
Status |
|---|---|---|
|
Accounting Standards Improvements for Not-for-Profit Organizations |
This exposure draft, issued by the AcSB in February 2017, proposes to replace sections on tangible capital assets, intangible assets and collections held by not-for-profit organizations. Not-for-profit organizations would follow Part II of the Handbook for tangible capital assets and intangible assets, except for items such as contributed assets and write-down of assets. Tangible capital assets, intangible assets and collections will need to be assessed and, if impaired, written down to reflect the decline in their value. Collections would need to be recorded on the statement of financial position, at cost or at nominal value. |
The AcSB expects to issue the following new standards in Q2 of 2018:
|
INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
|
2018 is in sight, and so are the new IFRS standards on Revenue and Financial Instruments. |
New developments
Better Communication in Financial Reporting
Check out this report from the IASB of how the companies featured in the case studies improved their communication of information in their financial statements.
Definition of Material (Proposed amendments to IAS 1 and IAS 8)
This exposure draft, issued by the IASB in September 2017, proposes to clarify the definition of “material.” The IASB expects that the proposed amendments will improve understanding of the existing requirements, but because they are based on existing guidance, the IASB does not expect them to significantly affect how materiality judgements are made in practice or to significantly affect entities’ financial statements.
Comment period ends on January 15, 2018.
Accounting Policies and Accounting Estimates (Proposed amendments to IAS 8)
This exposure draft, issued by the IASB in September 2017, proposes amendments that aim to help entities distinguish accounting policies from accounting estimates. Currently there is diversity in the way entities distinguish accounting policies from accounting estimates. That distinction has consequences because IAS 8 contains different requirements on how to account for changes in accounting policies and for changes in accounting estimates.
Comment period ends on January 15, 2018.
Active projects – watch for further activity on these matters
|
Proposed change |
Summary |
Status |
|---|---|---|
|
IFRS 17 Insurance Contracts |
IASB issued the final standard in May 2017. This new standard, IFRS 17 Insurance Contracts, replaces IFRS 4 Insurance Contracts, which was an interim standard allowing companies to carry on accounting for insurance contracts using national accounting standards resulting in different approaches. IFRS 17 requires all insurance contracts to be accounted for in a consistent manner. Insurance obligations will be accounted for using current values – instead of historical cost. |
Final standard is expected to be issued by the AcSB in the first half of 2018. |
|
Reporting the Financial Effects of Rate Regulation |
This DP considers the common features of rate regulation and explores which of them, if any, creates a combination of rights and obligations that is distinguishable from the rights and obligations arising from activities that are not rate-regulated. |
Currently in discussions. Another DP or an exposure draft is expected in the first half of 2018. |
|
Accounting for Dynamic Risk Management |
The DP explores a possible approach (portfolio revaluation approach) to better reflect dynamic risk management activities in entities’ financial statements. |
Discussion Paper issued by the IASB in April 2014. Currently in deliberations. Another DP is expected in the second half of 2018. |
|
Classification of Liabilities |
Proposed amendments to IAS 1 clarify the criteria for the classification of a liability as either current or non-current. |
Currently in deliberations. IASB expects to issue amendments in the second half of 2018. |
|
Conceptual Framework and Updating References to the Conceptual Framework |
The proposal aims to provide a more complete, clear and updated set of concepts that can be used by the IASB when it develops IFRSs and others to help them understand and apply those standards and to provide transition to the revised Conceptual Framework. |
EDs published by the IASB in May 2015. Currently in deliberations. Conceptual Framework is expected to be issued in the first half of 2018. |
|
Remeasurement on a Plan Amendment, Curtailment or Settlement/Availability of a Refund from a Defined Benefit Plan |
The proposed amendments to IAS 19 specify that the entity is required to use the updated assumptions about obligations and fair value of the plan to determine current service cost and net interest for the period followed by these changes. The proposed amendments to IFRIC 14 address how the powers of other parties, such as the trustees of the plan, affect an entity’s right to a refund of a surplus from the plan. |
Currently in deliberations. IASB expects to issue amendments in the first half of 2018. |
|
Definition of a Business and Accounting for Previously Held Interests |
The proposed amendments to IFRS 3 will help distinguish between a business and a group of assets when applying the definition of a business. The proposed amendments to IFRS 3 and IFRS 11 are also intended to clarify the accounting for previously held interests in the assets and liabilities of a joint operation in two types of transactions: those in which an entity obtains control of a business that is a joint operation and those in which it obtains joint control of a business that is a joint operation. |
Comment period ended on October 31, 2016. Currently in deliberations. IASB expects to issue amendments in the first half of 2018. |
|
Annual Improvements Cycle 2015-2017 |
The IASB issued this exposure draft in January 2017, proposing amendments to IAS 12, IAS 23 and IAS 28. |
The IASB expects to issue amendments to IAS 12 and IAS 23 in the 4th quarter of 2017. Amendments to IAS 28 have been issued by the IASB and AcSB. |
|
Improvements to IFRS 8 Operating Segments (Proposed amendments to IFRS 8 and IAS 34) |
The proposed improvements to IFRS 8 include amendments to clarify and emphasize the criteria for aggregating operating segments; to disclose the title and role of those who perform the function of the chief operating decision maker; and to provide information if segments in the financial statements differ from segments reported elsewhere. Proposed amendments to IAS 34 will require companies that change their segments to provide restated segment information for prior interim periods earlier than they currently do. |
Comment period ended on July 31, 2017. Currently in deliberations. |
|
Disclosure Initiative –Principles of Disclosure |
This Discussion Paper describes and seeks stakeholders’ views on disclosure issues that the IASB has identified during its outreach before and during its Principles of Disclosure project. IAS 1 contains general requirements for disclosures in the financial statements. Consequently, this Discussion Paper considers the existing requirements in IAS 1 as a starting point with a view to either making amendments to parts of IAS 1 or creating a new disclosure standard to replace parts of IAS 1. |
Comment period ended on October 2, 2017. |
|
Property, Plant and Equipment – Proceeds before Intended Use (Proposed amendments to IAS 16) |
This exposure draft proposes amendments that would prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity would recognize those sales proceeds in profit or loss. |
Comment period ended on October 19, 2017. Currently in deliberations. |
|
Post-implementation Review – IFRS 13 Fair Value Measurement |
This Request for Information (RFI) focuses on:
In addition, this RFI explores whether there is a need for further guidance on measuring the fair value of biological assets and unquoted equity instruments. |
Comment period ended on September 22, 2017. Request for Information feedback is expected in December 2017. |
Questions?
Here are some resources that will assist in the application of the standards.
Accounting for cap and trade transactions under IFRS
On December 9, 2016, the Government of Canada announced the Pan-Canadian Framework on Clean Growth and Climate Change (the Framework). Jurisdictions around the world have implemented cap and trade systems as an approach to reducing greenhouse gas emissions. Carbon pricing has financial implications for businesses. Over time, the materiality of these issues may increase as emissions caps become increasingly stringent. The IASB does not currently have any specific guidance to explain how to account for transactions in a cap and trade system operating under existing IFRS.
There are two basic accounting questions for transactions created by a cap and trade system:
- Recognition: Which International Financial Reporting Standards apply to assets and liabilities?
- Measurement: How are assets and liabilities initially and subsequently measured? What are the implications for the income statement?
This paper, published by CPA Canada, outlines three accounting approaches being used and accepted under existing IFRS for allowances held for compliance purposes and liabilities resulting from emissions.
Making Materiality Judgements – Practice Statement 2
IASB issued this Practice Statement in September 2017, a non-mandatory guidance, with the aim of providing reporting entities with guidance on making materiality judgements when preparing general purpose financial statements in accordance with IFRS Standards. This Practice Statement:
- provides an overview of the general characteristics of materiality,
- presents a four-step process an entity may follow in making materiality judgements when preparing its financial statements,
- provides guidance on how to make materiality judgements in specific circumstances, namely, how to make materiality judgements about prior-period information, errors and covenants, and in the context of interim reporting, and
- illustrates the types of factors that the entity should consider when judging whether information is material.
The Practice Statement is a non-mandatory document. It does not change or introduce any requirements in IFRS Standards.
Implementing IFRS 15
A panel discussion on the implementation of IFRS 15 Revenue from Contracts with Customers was held by the AcSB in October 2016. You can watch the video from the discussion and download the slides.
Viewpoints
This series discusses views of the Oil and Gas Task Force and the Mining Task Force on IFRS application issues relevant to junior oil and gas companies and junior mining companies, respectively. Recent publications:
Determining technical feasibility and commercial viability (Mining)
Inventory costing – Below normal capacity (Mining)
IFRS Discussion Group Meeting Topics
Established by the AcSB, the IFRS Discussion Group implements and maintains a regular public forum to discuss issues that arise in Canada when applying IFRS. The Financial Reporting & Assurance Standards Canada website allows for topics and issues discussed by the IFRS Discussion Group to be searched and sorted. Find out whether the group has discussed an issue that you face in applying IFRSs and get the meeting report extract and audio webcast for each issue you find.
Digest of issued standards and amendments
|
Standards affected |
Summary of changes |
Effective date |
|---|---|---|
|
IFRS 12 Disclosure of Interests in Other Entities |
Amendments clarify the scope of the standard. |
Annual periods beginning on or after January 1, 2017. |
|
IAS 7 Statement of Cash Flows |
Amendments will require entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. |
Annual periods beginning on or after January 1, 2017. |
|
IAS 12 Income Taxes |
Amendments clarify how to account for deferred tax assets related to debt instruments measured at fair value. |
Annual periods beginning on or after January 1, 2017. |
|
IFRS 1 First-time Adoption of International Financial Reporting Standards |
Amendments remove short-term exemptions for first-time adopters. |
Annual periods beginning on or after January 1, 2018. |
|
IFRS 2 Share-based Payment |
Amendments clarify how to account for certain types of share-based payment transactions. |
Annual periods beginning on or after January 1, 2018. |
|
IFRS 4 Insurance Contracts |
Amendments designed to address the concerns about the different effective dates of IFRS 9 and the forthcoming new Insurance Contracts standard. |
Annual periods beginning on or after January 1, 2018. |
|
IFRS 9 is built on a logical, single classification and measurement approach for financial assets that reflects the business model in which they are managed and their cash flow characteristics. Certain changes were made to the fair value option for financial liabilities to address the issue of own credit risk. IFRS 9 includes a new hedge accounting model. In addition, a single, forward-looking expected loss impairment model is introduced, which will require more timely recognition of expected credit losses. |
Annual periods beginning on or after January 1, 2018. |
|
|
The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard contains enhanced disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively and improves guidance for multiple-element arrangements. IFRS 15 supersedes IAS 11, IAS 18, IFRIC 13, IFRIC 15, IFRIC 18 and SIC-31. Amendments to IFRS 15 have been issued by the IASB which clarify how to identify the performance obligations, determine whether a company is a principal or an agent and determine whether the revenue from granting a licence should be recognized at a point in time or over time. Two additional reliefs are included, which reduce cost and complexity for a company when it first applies the new standard. |
Annual periods beginning on or after January 1, 2018. |
|
|
IAS 28 Investments in Associates and Joint Ventures |
Amendments with respect to measuring an associate or joint venture at fair value clarify that an entity makes the election separately for each associate or joint venture. |
Annual periods beginning on or after January 1, 2018. |
|
IAS 40 Investment Property |
Amendments clarify the requirements on transfers to, or from, investment property. |
Annual periods beginning on or after January 1, 2018. |
|
IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration |
This Interpretation addresses the exchange rate to be used in transactions that involve advance consideration paid or received in a foreign currency. |
Annual periods beginning on or after January 1, 2018. |
|
IFRS 16 Leases |
This new standard replaces IAS 17 Leases and brings leases onto companies’ balance sheets, increasing the visibility of their assets and liabilities. IFRS 16 removes the classification of leases as either operating leases or finance leases (for the lessee – the lease customer), treating all leases as finance leases. Short-term leases (less than 12 months) and leases of low-value assets (such as personal computers) are exempt from the requirements. |
Annual periods beginning on or after January 1, 2019. |
|
IFRIC 23 Uncertainty Over Income Tax Treatments |
This IFRIC Interpretation provides guidance on how uncertainty over income tax treatments should affect the accounting for income taxes. |
Annual periods beginning on or after January 1, 2019 |
|
IFRS 9 Financial Instruments |
This standard was amended to allow companies to measure particular pre-payable financial assets with so-called negative compensation at amortized cost or at fair value through other comprehensive income if a specified condition is met – instead of at fair value through profit or loss. |
Annual periods beginning on or after January 1, 2019 |
|
IAS 28 Investments in Associates and Joint Ventures |
This standard was amended to clarify that companies should account for long-term interests in an associate or joint venture – to which the equity method is not applied – using IFRS 9. |
Annual periods beginning on or after January 1, 2019 |
|
IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures |
These standards were amended to eliminate an inconsistency between IFRS 10 and IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. Subsequent to the amendments, a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not), and a partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. |
Effective date to be determined. These amendments are available for application. |
PUBLIC SECTOR ACCOUNTING (PSA)
Active projects – watch for further activity on these matters
|
Proposed change |
Summary |
Status |
|---|---|---|
|
Conceptual Framework Fundamentals and the Reporting Model |
Consultation paper proposes a new reporting model and draft principles on public sector characteristics, financial statement objectives, qualitative characteristics, elements, recognition, measurement and presentation. |
Consultation Paper 3 was issued by the PSAB in March 2015. Currently in deliberations. Statement of Principles is expected in the 2nd quarter of 2018. |
|
Employment Benefits: Deferral Provisions in Sections PS 3250 and PS 3255 |
The objectives of this Invitation to Comment are to explain why PSAB is considering whether the deferral provisions in the standards remain appropriate; identify potential alternatives and related considerations; and seek stakeholder input prior to PSAB establishing its preliminary views on this issue. The ultimate objective of this project is to issue a new employment benefits section, replacing Sections PS 3250 and PS 3255. |
Invitation to Comment related to the Employment Benefits Project was issued by PSAB in November 2016. Comment period ended on March 3, 2017. Second Invitation to Comment is expected in the 4th quarter of 2017. |
|
Asset Retirement Obligations, Proposed Section PS 3280 |
This exposure draft proposes to issue a new section on asset retirement obligations and withdraw Solid Waste Landfill Closure and Post-Closure Liability, Section PS 3270. This new section establishes uniform criteria for recognition and measurement of asset retirement obligations, including obligations that may not have previously been reported, and requires disclosures related to asset retirement obligations. The new section would apply to fiscal years beginning on or after April 1, 2021. |
Comment period ended June 15, 2017. Currently in deliberations. PSAB expects to issue the final standard in the 2nd quarter of 2018. |
|
Revenue, Proposed Section PS 3400 |
This exposure draft proposes to issue a new section on revenue. A framework for revenue is proposed describing two categories of revenue – exchange transactions or unilateral transactions. The new section would apply to fiscal years beginning on or after April 1, 2021. |
Comment period ended on August 15, 2017. Currently in deliberations. |
|
Public Private Partnerships |
This Statement of Principle outlines the proposal to expose a new section on certain public private partnerships. |
Comment period ended on October 17, 2017. Exposure draft is expected in the 2nd quarter of 2018. |
Questions?
Here are some resources that will assist in the application of the standards.
PSA Discussion Group Meeting Topics
Established by the PSAB, the PSA Discussion Group provides a public forum for discussion of issues arising on the application of the PSA Handbook. Summaries of topics and discussions from past meetings are available on the Financial Reporting & Assurance Standards Canada website.
Digest of issued standards and amendments
2. Assurance and Related Services
|
New Review Engagements standard will be in effect soon! Applies to reviews of financial statements for periods ending on or after December 14, 2017! |
New developments
Reporting on Compliance with Specific Authorities for Transactions Coming to the Auditor’s Notice during the Audit of Financial Statements
This exposure draft, issued by the AASB in August 2017, proposes to issue Assurance and Related Services Guideline AuG-49. This guideline will address engagements that require an auditor to express an opinion on whether the transactions that have come to their notice in the course of conducting a financial statement audit complied with specified authorities. Section PS 5300, which is expected to be withdrawn on the issuance of CSAE 3530 and CSAE 3531, currently addresses such engagements.
Comment period ends on November 28, 2017.
Enhancing Audit Quality Focusing on Group Audits
The IAASB issued a project update in September 2017. The IAASB is committed to revising ISA 600. A number of revisions to ISA 600 are contingent upon the foundational revisions being made to other standards, specifically, ISQC 1, ISA 220 and ISA 315. As these projects progress and resources become available, work on ISA 600 will commence, to reflect revisions in the other standards, as well as work on the other issues that need to be addressed in the revision of ISA 600.
In the works
Compilation Engagements
Exposure draft is being developed to address needed changes to the standard on compilation engagements. ED is expected to be approved in the second half of 2018. Issues being discussed by the AASB include:
- the scope and definition of a compilation engagement;
- engagement acceptance and continuance;
- documentation requirements;
- whether CSQC 1 should be applicable to compilation engagements; and
- whether communication with management and those charged with governance is needed.
Audit Data Analytics
CPA Canada has formed an Audit Data Analytics Committee (the Committee) comprising audit practitioners, internal auditors, members in business and academia to:
- obtain up-to-date information on the nature and extent of the use of technology-enabled data analytics by auditors;
- monitor developments in auditors’ use of audit data analytics; and
- provide input to auditors and other interested parties by developing non-authoritative guidance on these matters.
Representatives of the Committee are now proactively collaborating with the AICPA and their Audit Analytics Guide Task Force on the development of an updated version of the AICPA Audit Guide Analytical Procedures. This comprehensive Guide, with appropriate amendments, will be issued as non-authoritative audit guidance in Canada and provide foundational guidance to auditors of all sizes on the use of data analytics in the audit of financial statements.
Active projects – watch for further activity related to Canadian Auditing Standards
|
Proposed change |
Summary |
Status |
|---|---|---|
|
The IAASB is proposing to revise the standard on Auditing Accounting Estimates and Related Disclosures (ISA 540). The objective of the revised standard is for the auditor to obtain sufficient appropriate audit evidence to evaluate whether accounting estimates and related disclosures are reasonable in the context of the applicable financial reporting framework, or are misstated. The revised standard will include enhanced requirements for risk assessment and response procedures, consideration of complexity, use of judgement and estimation uncertainty, consideration of complex models, forward-looking information and internal controls in auditing accounting estimates and includes provisions to enhance application of professional skepticism and consideration of the potential for management bias, including enhanced risk assessment requirements, more granular requirements with respect to obtaining audit evidence, and requirements to “stand back” and evaluate the audit evidence obtained. |
The IAASB issued this exposure draft in April 2017. The AASB’s related exposure draft proposes no Canadian amendments. Comment period ended on August 1, 2017. Currently in deliberations. |
Active projects – watch for further activity related to Other Canadian Standards
|
Proposed change |
Summary |
Status |
|---|---|---|
|
Exploring the Demand for Agreed-Upon Procedures Engagements and Other Services, and the Implications for the IAASB’s International Standards |
This Discussion Paper, issued by the IAASB, resulted from a higher demand for agreed-upon procedures engagements either as stand-alone engagements or in combination with other engagements. The IAASB has established a working group to explore such engagements and inform the IAASB’s decisions in this regard. The objective of the AASB’s project is to update Section 9100, Reports on the Results of Applying Specified Auditing Procedures to Financial Information Other than Financial Statements. |
The AASB issued this Invitation to Comment in December 2016 to encourage Canadian stakeholders to provide feedback to the IAASB’s Discussion Paper of the same name. AASB’s comments period ended on February 10, 2017. Currently in deliberations. |
|
Reporting on Compliance |
The AASB is proposing to issue CSAE 3530, Special Considerations – Attestation Engagements to Report on Compliance and CSAE 3531, Special Considerations – Direct Engagements to Report on Compliance. These standards would replace Sections 5800, 5815 and 8600. In addition, the standards would also replace certain paragraphs of Section 5300. Objective of the proposal is to update the standards and rewrite them in a clarity format. The proposed standards will cover both audit and review engagements. |
The AASB issued this re‑exposure draft in April 2017. Comment period ended on July 28, 2017. Currently in deliberations. Final Handbook material expected to be approved in the 1st quarter of 2018. |
Digest of issued standards and amendments – Canadian Auditing Standards
|
Standards affected |
Summary of changes |
Effective date |
|---|---|---|
|
Responding to Non‑Compliance or Suspected Non‑Compliance with Laws or Regulations |
The revised CAS 250 incorporates changes to address actual or perceived inconsistencies in the approach to identifying and responding to instances of identified or suspected non-compliance with laws and regulations between the standard and relevant ethical requirements. CPA Canada Audit and Assurance Alert: CAS 250 non-compliance with laws and regulations |
Effective for audits of financial statements for periods beginning on or after December 15, 2018. |
|
New and Revised Auditor Reporting Standards and Related Conforming Amendments |
AASB issued new CAS 701, Communicating Key Audit Matters in the Independent Auditor’s Report and revised CAS 260, 570, 700, 705, 706, 800, 805 and 810, along with some conforming amendments to other CASs. Communication of key audit matters is required when the auditor is required by law or regulation or when the auditor decides to do so. The requirement in ISA 701 for auditors of listed entities to communicate key audit matters has been excluded from CAS 701 at this time. Amendments include enhanced reporting on going concern, affirmative statement about the auditor’s independence, enhanced description of the responsibilities of the auditor and key features of an audit, and change in order of the opinion and basis for opinion sections. CPA Canada Audit and Assurance Alert: New and revised auditor reporting standards CPA Canada Audit and Assurance Alert: CAS 701 Key audit matters |
Effective for audits of financial statements for periods beginning on or after December 15, 2018. |
|
Addressing Disclosures in the Audit of Financial Statements |
The changes to various CASs clarify the concept of disclosures as an integral part of the financial statements and emphasize the need for auditor consideration of disclosures earlier in the audit process, including understanding of relevant aspects of the information system relating to information disclosed in the financial statements, identifying and assessing the risks of material misstatements in quantitative and qualitative disclosures, obtaining sufficient appropriate audit evidence relating to disclosures, and evaluating the overall presentation of the financial statements, including their relevance and understandability. |
Effective for audits of financial statements for periods beginning on or after December 15, 2018. |
|
The Auditor’s Responsibilities Relating to Other Information |
Revised CAS 720 specifies responsibilities of auditors relating to the range of other information in documents containing audited financial information and improves transparency by requiring auditors to articulate in their reports their responsibilities and the outcome of their work. CPA Canada Audit and Assurance Alert: CAS 720 Other information |
Effective for audits of financial statements for periods beginning on or after December 15, 2018. |
Digest of issued standards and amendments – Other Canadian Standards
ACRONYMS USED
AASB – Auditing and Assurance Standards Board
AcSB – Accounting Standards Board
ED – Exposure Draft
Re-ED – Re-Exposure Draft
GAAP – Generally Accepted Accounting Standards
IAASB – International Auditing and Assurance Standards Board
IASB – International Accounting Standards Board
IFRIC – International Financial Reporting Interpretations Committee
CMA – Certified Management Accountants
CPA – Chartered Professional Accountants
CPAB – Canadian Public Accountability Board
CSA – Canadian Securities Administrators
PSAB – Public Sector Accounting Board
Meet the Author
Inna Kleiman
Information is current to November 22, 2017. The information contained in this release is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.